Economy in U.S. ekes out 0.1% gain as trade gap shrank

The economy in the U.S. managed to barely expand in the fourth quarter, erasing a previously estimated contraction, as the smallest trade deficit in almost three years helped overcome the biggest plunge in defense spending since the Vietnam War era.

Gross domestic product grew at a 0.1% annual rate, up from a previously estimated 0.1% drop, revised figures from the Commerce Department showed today in Washington. The median forecast of 83 economists surveyed by Bloomberg called for a 0.5% gain. Federal military outlays declined at a 22% annual pace, the biggest decrease since 1972.

The pace of growth indicates Federal Reserve policy makers are likely to maintain asset purchases intended to boost the expansion, which may be curbed by automatic government spending cuts set to take effect tomorrow. At the same time, healing in the residential real estate market and sustained gains in consumer spending even as the payroll tax rose show the economy probably picked up at the start of this year.

“The growth rate is still very pitiful,” said Harm Bandholz, chief U.S. economist at UniCredit Group in New York, who projected a 0.2% increase. “At least, the awkward minus sign disappears.”

Fewer Claims

Fewer Americans than forecast filed applications for unemployment benefits last week, showing companies were looking beyond looming government spending cuts and maintaining staffing, another report showed today. Jobless claims decreased by 22,000 to 344,000 in the week ended Feb. 23, the Labor Department reported in Washington. The median forecast of 44 economists surveyed by Bloomberg called for 360,000 applications.

Stock-index futures were little changed after the reports. The contract on the Standard & Poor’s 500 Index maturing in March rose less than 0.1% to 1,516.8 at 8:50 a.m. in New York.

Economists’ projections for GDP, the value of all goods and services produced, ranged from a 0.1% drop to a gain of 1%. The estimate is the second of three for the quarter, with the final release scheduled for the end of March when more information becomes available.